Owning a home is a wish that many Indians choose to pursue. To enable such house dreamers to achieve their fantasized estates, financial institutions are now offering home loans at feasible interest rates. With an affordable rate of interest levied on the home equity loan amount, buying a house has become easy these days.
While the low-interest rate enables you to procure sufficient capital for a home investment, it can drive your temptation for another purchase. You might be done decorating your first home but you may soon feel an urge to invest for a second home. Many locals have considered buying a second home for its tax benefits and investment opportunities. You can also add the second home as your retirement shelter where you choose to spend your days with your loved ones. Whether you are planning on your retirement or using it as an investment opportunity you must consider the following attributes before making the required purchase.
Things to consider
- Affordability is the first aspect that comes in your mind. While you are looking for a window to invest your home equity loan you must ask yourself whether it will be feasible for you. There is also the factor of EMIs which you have to pay every month if you have taken a home loan. Your EMI expenses will take a certain fraction of your income so you need to make sure whether you can afford to make the leap.
- Other than being an additional home address the secondary investment can pave the way for monthly income. While you may not choose to reside soon on the newly bought home you can rent it to others. Renting can help you generate profit on those monthly EMIs. You must think of a sum that fulfils your yearly maintenance cost and fits the EMI sum.
- Before you are certain to make the leap you must have an approximate idea of the principal sum to be loaned. Know that you have to pay the monthly EMIs accordingly so make sure that the loaned amount is not causing a heavy burden on your back.
- If you want a secure future for your home then consider paying for home insurance. Insurance covers your finances in case unannounced calamities occur and wreak havoc on your house.
Pondering over these points will assure whether you are all set to invest or need some time to adjust your finances. While you may be wondering about the benefits to reap, here are some perks that you can enjoy on your second home purchase.
- One of the most undesirable aspects of availing home purchase loan is the monthly EMI scheme. A home loan purchase may grant you the required capital faster but will gradually take a toll in the future. By gobbling up a certain fraction from your hard earned income paying EMI has never been a desired aspect. If you don’t want those monthly EMIs reducing your overall income figure then there is an option for you. The recently bought house can be given at rent provided you are not residing there soon. The rented sum should be devised as per the price of the monthly EMI. As a result, you are not sustaining any loss and won’t have to worry about your savings from the income. As the rented figure will increase gradually with years passing it will generate extra money at your hand.
- Like EMIs on a home purchase loan that eats up your income, tax paying is also an undesirable aspect. While you are seeking ways to reduce the tax sum know that a second home purchase can reduce your tax deduction from the monthly income. If you are familiar with the section 80C of the Indian constitution you will be pleased to know that tax saving can be guaranteed on the principal loan. Section 24B of the Indian constitution also states that the interest payment on a certain loan can also lead to a tax deduction. As a result, you can apply both the dictums on your borrowed sum which will help save your tax significantly.
While being a tax saver, extra income generator and a retirement shelter a secondary home have certain cons associated with it.
- In case you want to liquidate your second home property for quick cash, you won’t be able to do so without difficulty. With the huge cost involved in its liquidation, you might not be able to gather a profitable sum. It will take some months before you actually get to liquidize your home.
- With monthly EMIs taking up a lot of your income you will have no room for your personal savings.
- A second home will generate its maintenance cost adding an extra expense on your monthly ledger.
If you wish to avail a second home then you must be aware of the certain pros you will benefit from as well as the cons associated with it. Taking both the positives and the negatives under consideration will enable you make the overall estimate. While you have the approximate estimate at hand you can decide whether to take the leap or not.